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Tuesday, 11 November 2014

Exim Bank plans sukuk

The head of Malaysia’s state-owned trade financier said he plans to tap the global sukuk market for a second time, as Shariah-compliant assets look set to reach 40 per cent of the bank’s total in 2015.

Export-Import Bank of Malaysia Bhd’s assets that comply with religious tenets will rise to RM2.4 billion (US$721 million) this year, representing a 30 per cent portion, from 2013’s RM1.5 billion, chief executive officer Datuk Adissadikin Ali said in an interview yesterday. The company is aiming to sell dollar-denominated Islamic bonds in the second half of next year, he said.

The state-owned entity became the world’s first trade financier to issue US currency sukuk with its debut offering in February that helped plug a shortage of corporate Islamic dollar debt in Asia. The lender started providing Shariah-compliant loans in 2009 to support demand in an industry whose assets Bank Negara Malaysia projects will triple to US$6.5 trillion worldwide by 2020.

“We are not short of business,” Adissadikin said in Kuala Lumpur. “Our plan is to grow by 30 per cent every year and we have been beating the target consistently.”

The lender is expanding its Islamic finance business as part of Prime Minister Datuk Seri Najib Razak’s drive to make the nation a global Shariah-compliant hub by 2020, Adissadikin said. Exim Bank met its full-year target of RM5 billion for Islamic and conventional loans at the end of October and the figure may now climb to RM6 billion this year, he predicts.

The company’s planned sukuk will be its third in the international debt market and Exim Bank faces the prospect of higher yields as the Federal Reserve gears up to raise interest rates next year.

The bank will probably offer US$200 million to US$300 million of dollar sukuk with a maturity of five years or more sometime in the second half of 2015, Adissadikin said.

“Timing is not a priority as we can pass the cost to our clients,” he said.

Exim Bank sold US$300 million of dollar Islamic notes due in 2019 at a coupon of 2.874 per cent in February. The securities last yielded 2.48 per cent, according to data compiled by Bloomberg. The lender is rated A3, the fourth-lowest investment grade, by Moody’s Investors Service and A- by Fitch Ratings.

Average yields on global sukuk, which pay returns on assets to comply with the religion’s ban on interest, dropped 57 basis points this year to 2.85 per cent, according to a Deutsche Bank AG Index. That’s down from 2014’s high of 3.44 per cent on January 2 and compares with the low of 2.77 per cent in September.

Worldwide sales of the debt rose 10 per cent to US$38.8 billion in 2014 from a year earlier after reaching US$43.1 billion in 2013 and an unprecedented US$46.8 billion in 2012, data compiled by Bloomberg show.

Exim Bank’s total banking assets may end the year around RM8 billion, up from RM5.3 billion in 2013, Adissadikin said. The company posted a net profit of RM144.7 million last year, compared with RM123.8 million in 2012, according to its annual annual report. Adissadikin declined to give an earnings forecast for 2014.

Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd, said it makes sense for Exim Bank to be offering Shariah-compliant financing given that it’s a significant part of the Malaysian economy.

“Exim Bank Malaysia acts as a strong ambassador for Islamic finance,” Badlisyah at the unit of CIMB Group Holdings Bhd, said in a phone interview in Kuala Lumpur yesterday. “The very fact that they issued a dollar sukuk this year and are able to offer wider solutions to their clients also allows them to stand out.